Residential
Brokerage for Greenwich Homes
203-622-2020
KLA@KayeLewis.com
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Real Estate NewsReal estate exchange helps secure 'dream condo' By Robert J. Bruss DEAR BOB: I currently own a rental condo. If I move into it for 24 months, I believe I will not be liable for any capital gains tax. But I would like to sell the rental condo and purchase another rental property using the Internal Revenue Code 1031 tax-deferred exchange you often discuss. How long would I have to rent the condo I purchase before I can convert it into my personal residence? – Richard W. DEAR RICHARD: If I understand your e-mail correctly, instead of moving into your rental condo to convert it into your principal residence after 24 months of occupancy, to claim up to $250,000 tax-free sale profits under Internal Revenue Code 121, you instead want to make an IRC 1031 tax-deferred trade for your ultimate dream condo. That's feasible. To make a qualified tax-deferred trade, presumably a Starker IRC 1031(a)(3) exchange, you must meet the requirements. These include having the sales proceeds for your old condo held by a qualified third-party intermediary accommodator, designating the replacement property within 45 days, and completing the acquisition within 180 days. The property you acquire in a tax-deferred trade must be held as a rental at the time of acquisition. There is no exact answer to how long it must be rented before you can convert it into your personal residence. To show rental intent at the time of acquisition, most tax advisers suggest at least 6 to 12 months. For more details, please consult your tax adviser.
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